Fed Warned: Uncertainty is the New Threat in the Markets

Highlights from the Fed's Financial Stability Report

The Federal Reserve (Fed) announced in its November Financial Stability Report that policy uncertainty is the most significant risk facing the American financial system. The Fed pointed out that among these uncertainties are geopolitical risks, the rise in long-term interest rates, ongoing inflation, and the potential effects of changes in the perception of artificial intelligence.

Policy Uncertainty and Markets

The report highlighted that participants continued to express concerns about trade policy, central bank independence, and the accuracy of economic data. In this context, it was emphasized that the unease caused by policy uncertainty could lead to volatility in asset prices. The potential for economic uncertainties to disrupt market dynamics emerges as a critical point of focus for analysts.

Effects of Geopolitical Risks

Participants noted that they continue to observe the potential for expansion of current geopolitical tensions. The ongoing rate of inflation remains a persistent threat to financial stability, especially when combined with a weakening labor market, which presents a noteworthy situation.

Changes in Perception of Artificial Intelligence and Risky Assets

The impact of artificial intelligence on stock performance has recently become a major topic of discussion. The Fed's report states that shifts in perceptions in this area could lead to corrections in risky assets. If these corrections are substantial enough, they are expected to result in additional slowdowns in the labor market and tightening of financial conditions. This situation has been recorded as an important development for investors to pay attention to.